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Owner won't allow Newberg paper mill to reopen

Would-be buyer says he'd reopen the mill and use Oregon's recycled paper as raw material, but mill owner insists on destroying the papermaking equipment to avoid competition. Some recycled paper is now going to landfill because China won't buy it any more.

Ever since China stopped buying the recycled paper Oregonians dutifully stow in their curbside recycling bins, there's been hope of reopening one of Oregon's shuttered paper mills to reuse that paper as raw material.

But that doesn't appear likely at the shuttered paper mill in Newberg.

Atlanta-based WestRock Co., which bought the mill in October 2015 and announced its closure just two weeks later, inked an $8.25 million deal in January to sell the facility — on condition the papermaking machinery is destroyed and turned into scrap metal — according to a leaked purchase agreement submitted last month to the Antitrust Division of the U.S. Department of Justice.

WestRock also apparently rebuffed a $15 million purchase offer in April by New York businessman Rahul Kejriwal, who told millworker union leaders he'd like to reopen the Newberg mill and use Oregon's recycled paper to produce pulp and paper there for export. In an email also submitted to federal antitrust officials, WestRock told Kejriwal the mill was under contract to sell, and "the paper machines in the mill must be destroyed and not put back into use as a condition of sale."

Such anti-competitive practices have been going on for years in the paper industry, said Greg Pallesen, president of the Portland-based Association of Western Pulp and Paper Workers.

"It's market manipulation," Pallesen said. "It's buy your competitors, close key mills that have the result of reducing supply and driving the price up."

WestRock bought the Newberg mill plus mills in Ohio and Georgia for $289 million in 2015, and the company CEO issued a news release saying the Oregon and Georgia mills would help diversify the company's product offerings, and WestRock would "improve the cost structure of both mills."

Then it quickly closed the Newberg and Ohio mills.

"Obviously they had zero intent to run the mills," Pallesen said. "In the instant they announced the closures, their stock went up and the price of the product they were making went up."

When Pallesen's union negotiated closure terms for the workers at the Newberg mill, "They would tell us, 'We're not going to sell to anybody who's going to restart'" the mill, Pallesen said.

WestRock's corporate communications department did not respond to phone and email requests for interviews.

In January of this year, WestRock announced an agreement to buy KapStone Paper and Packaging Co., a large Illinois-based papermaker whose holdings include three paper mills in Longview and the Seattle area. Pallesen now worries about their fate.

The Association of Western Pulp and Paper Workers, which represents nearly 4,000 workers, sent a May 8 letter to the U.S. Department of Justice Antitrust Division, arguing the proposed buyout "poses serious threats to full and fair competition." The letter also asked federal authorities to halt the pending "permanent destruction" of the mill equipment in Newberg.

"There's evidence that there's violation of antitrust laws," said Edgar Sargent, a partner in the Susman, Godfrey law firm in Seattle that represents the union in the matter.

"That clause in the contract that the equipment had to be destroyed, it's just bizarre," Sargent said. "Why would you do that?"

In the leaked purchase agreement for the mill and its equipment, there are six pages of equipment that must be destroyed pursuant to the purchase by KBD Enterprises LLC. The list includes two paper machines, recycling equipment and at least five motors, among other gear.

Some of those motors could be used for non-papermaking purposes and are valued at $300,000 to $400,000 each, Pallesen said.

Kimberly Robinson, the KBD manager who signed the leaked sales agreement, could not be reached for comment.

It's unclear now if that sale will go ahead, Pallesen said, as the company may not have been able to come up with the necessary cash.

The federal Antitrust Division had not returned a formal request for a status update on the complaint as of press time on Tuesday.

The China factor

Historically, Oregon was a world leader in paper manufacturing, boasting an industry that employed more than 10,000 workers in 1980, according to the Oregon Employment Department. But the industry has been gradually shifting overseas, where environmental regulations are lighter and land and labor costs lower.

In the past seven years, Portland-area mills closed in Newberg, West Linn and Oregon City. Last week, one of the divisions of the large Georgia Pacific mill complex in Camas, Wash., owned by Koch Industries, shut down. Plumes from that plant have long been visible from Portland.

When the Oregon City mill closed in 2011, owners blamed China for the lack of supply of recycled paper. China had bid up the price of recycled paper collected at Oregon curbsides so local mills couldn't afford it, then used it overseas for reprocessing there.

But in an abrupt turnaround, China announced last fall it would stop buying mixed paper and plastics collected here, on the grounds there were too many inpurities mixed in.

Mixed paper accounts for about 60 percent of the volume put in curbside recycling bins, according to Vinod Singh, operations manager for Far West Recycling Inc., which acquires the recyclables from Oregon haulers and then sorts, bundles and sells them for reuse.

China's decision caused panic in the recycling industry, making it cheaper in some cases to dump recyclables into landfills than reuse them.

Building a new paper mill in the Northwest is estimated to cost $500 million to $1 billion, so the recycling industry has pinned some of its hopes on the reopening of abandoned mills that still have their papermaking equipment, such as those in Newberg and West Linn. The West Linn mill is tied up in bankruptcy proceedings.

Mystery buyer

Kejriwal did not respond to multiple interview requests, and it's unclear where he'd get his finances. His letter of intent to buy the Newberg plant for $15 million, provided by Pallesen, promises only $5 million up front and $1 million a year for the next 10 years.

Pallesen said Kejriwal has connections to his native India, a fast-growing market with a voracious appetite to buy pulp and paper.

It still makes good environmental sense to make paper here, Pallesen said. Oregon mills are among the cleanest in the world, and the state has an ample supply of scrap wood, recycled paper and other fiber to make pulp and paper, plus cheap electricity and a skilled workforce. Because of the imbalance of trade with Asia, it's cheap to commission otherwise-empty shipping containers arriving here with Chinese manufactured goods — and send them back filled to Asia.

Kejriwal has said he would use 100 percent recycled paper if he can buy a mill here, and would welcome a unionized work force, Pallesen said.

Pallesen recently introduced Kejriwal to Gov. Kate Brown's staff, seeking their assistance. "We'd like to see pressure put on WestRock," he said. But no promises were forthcoming.

"My overall impression was I don't know that they're going to do much."

Meanwhile, the Oregon Department of Environmental Quality continues to grant one-time and ongoing approvals for solid waste authorities to bury their recyclables in the landfill.

Since Oct. 1, 10,088 tons of recyclables, much of it collected at Oregon curbsides, has been authorized for the dump instead. That's equal to 5 to 6 percent of all materials collected in commingled recycling bins in Oregon.

Reach Steve Law at 971-204-7866, This email address is being protected from spambots. You need JavaScript enabled to view it., or twitter.com/SteveLawTrib. To get Sustainable Life news delivered weekly to your inbox: https://bit.ly/2Isfz1F